By Aaron Chaze
Strong sales: Mahindra & Mahindra’s popular SUV
In the face of rising inflation and GDP growth, India’s central bank, the Reserve Bank of India surprised observers with a higher-than-expected interest rate hike. The RBI upped its forecast for the country’s GDP growth from 8.0% to 8.5% for the 2010–2011 fiscal year (April–March), based on better-than-expected performance from the industrial sector. It also raised its inflation forecast from 5.5% to 6.0% and, in the last week of July, hiked the short-term lending rate by a quarter percentage point to 5.75%
India’s growth momentum is evident in the volume of sales achieved by automobile manufacturers. Tata Motors, India’s largest domestic car manufacturer reported 41% year-on-year (y-o-y) growth in sales volume for July 2010, while Mahindra & Mahindra (the second largest domestic car manufacturer) reported 24% volume growth. Maruti Suzuki India (54% owned by Suzuki Motors of Japan), the country’s largest car manufacturer, reported volume growth of 29% y-o-y for July 2010 to 100,870 vehicles. The company’s sales during the April–July 2010 period rose 26% to 380,000 vehicles. For the previous fiscal year (April 2009–March 2010), Maruti’s volumes rose by 29% to 1.02 million vehicles, exceeding a million vehicles for the first time ever. Hyundai Motors, India’s second largest car manufacturer, reported a 24% growth in domestic sales and a fall in export sales volumes by 3.3%. GM India reported a 45% growth in volumes, and Ford India reported a 307% growth, though on a very low base of a few thousand vehicles sold a month.
Even as auto sales take off in India, domestic manufacturers continue to look for acquisitions overseas. Mahindra & Mahindra decided in the first week of August to bid for Ssangyong Motors of Korea. Mahindra & Mahindra is a leading manufacturer of sport utility vehicles. The Ssangyong Motors acquisition will be a good fit for its portfolio given its focus on utility vehicles.